Pharmaceuticals are usually sold through a third-party payment system in which pharmacies look directly to insurers or other obligors for primary payment. Pharmacies must rely on the payment practices and creditworthiness of third parties to collect for prescriptions provided to customers covered by a third-party payment plan.
The conventional prescription claims processing and payment system involves one or more entities providing one or more of a variety of functions. Generally, these parties include: the pharmacy, switch, processor and obligor.
A patient may make a claim under a health plan through the patient's pharmacy at the time the prescription is filled. Today most conventional pharmaceutical claims are adjudicated using an electronic on-line system. Pharmacy's generally submit claims in real-time to a claims adjudication network for processing.
A switch provides the means for relaying electronic claims data from the pharmacy to a processor. Based upon a Bank Identification Number (“BIN”), a unique number issued by the American National Standards Institute, which identifies the appropriate processor, the switch forwards messages from the service provider to the processor and returns the responses. In general, a switch does not provide or alter the content of any of the messages it routes, but is merely a communications conduit.
A processor is an entity that provides on-line claim adjudication services. A processor's responsibility is to adjudicate claims by applying the plan parameters (i.e., determining the acceptability of a claim based, for example, on a claimant's eligibility and coverage of the medication), and then to report the results to the plan sponsor on a scheduled basis. The processor may be, for example, a pharmacy benefit management company (PBM) or a company contracted to perform services on behalf of a PBM.
An obligor is an entity (e.g., a workers' compensation carrier, state fund, insurance company or employer) that is generally considered as ultimately responsible for making payment for the healthcare services.
The National Council for Prescription Drug Programs (“NCPDP”) provides standard formats for third-party claims processing. For example, the NCPDP provides the following electronic message formats, which specify field number, field name, field type, field format, and field length positions: (i) transaction format for prescription, which includes fields such as BIN, version number, transaction code, processor code, pharmacy number, group number, cardholder identification number, date of fill, and prescription number; (ii) response format for eligibility verification or prescription claim, which includes fields such as BIN, transaction code, response status, and response data; and (iii) reversal format, which includes fields such as BIN, transaction code, processor code, pharmacy identification number, date of fill, and prescription number. Other NCPDP standard message formats include a workers' compensation claim format and Medicaid claim format, which are designed to accommodate the processing of drug claims covered by workers' compensation and Medicaid programs.
After a patient or customer presents a pharmacy with a prescription, the pharmacist utilizes an in-house computer prescription system and gathers the necessary information about the prescription, patient, and insurance. The pharmacist inputs this information into a personal computer. This information is then generally transmitted over the on-line network via switches which direct the outgoing messages to the appropriate processor.
In response to the pharmacy's claim, an NCPDP formatted adjudication message is then transmitted by the processor receiving the claim back through the same channels to the originating pharmacy. An adjudication is an evaluation of the validity of a claim by reference to the patient eligibility and the terms and conditions of the plan, such as drug products allowed, types of permitted drug interactions and dosages, and drug prices which will be reimbursed by the plan. The adjudication message normally contains adjudication/authorization information, the unique prescription number and the previously agreed upon price for that prescription. An adjudication message transmitted by a processor indicates the following three items of information about the claim: (i) that it has been received by the processor; (ii) that it has been reviewed by the processor against specifications established by the plan and agreed upon by the obligor; and (iii) that it has been indicated for disposition in one of three ways: approval, rejection or pending status.
Once a pharmacy receives a positive on-line adjudication response to a claim, it logs the claim as an approved claim receivable, dispenses the drug based on instructions from the doctor and awaits payment.
Persons covered by a health plan are typically issued an identification card by the health plan sponsor to facilitate reimbursement for covered healthcare services and prescription medications. The NCPDP has issued a standard format for prescription benefit card design. This format requires the inclusion of an “essential information window,” where pharmacy personnel can quickly obtain information needed to submit the claim for on-line adjudication. The card includes a Bank Identification Number (RxBIN), a Processor Control Number (RxPCN), a Group Number (RxGrp) and a member identification number. The Bank Identification Number (BIN), also referred to as an International Identification Number (IIN), identifies the processor for network routing. Each processor has a unique BIN assigned by American National Standards Institute (ANSI). The Processor Control Number is a control number assigned by the processor for internal routing of the claim by the processor. The Group Number is also used by the processor for routing and processing the claim. It is often used to identify the cardholder group or employer group. The card often contains other information to facilitate fulfillment and reimbursement, such as co-payment information and contact information for the health plan sponsor.
When a patient receives a prescription that is covered by the health plan, the patient merely presents the prescription at a pharmacy, along with the patient's identification card. The card provides sufficient information to the pharmacy for the pharmacy to electronically adjudicate the claim at the pharmacy before filling the prescription. That is, the pharmacy can immediately confirm that the person and prescription are covered by the health plan and the amount of any co-payment due from the person. Thus, the electronic adjudication process provides the pharmacy assurance that the claim is covered and it will be paid.
In many instances, the plan sponsor pays the pharmacy at pre-negotiated reimbursement rates. Such negotiation can be done directly between the plan sponsor and the pharmacy or through a PBM. For example, a PBM may represent a number of obligors. The PBM negotiates discounts for pharmaceuticals and other terms with pharmacies on behalf of its clients.
Though the identification card system adequately facilitates the processing of prescription claims covered by health care plans, it does not facilitate the adjudication of prescriptions associated with workers' compensation claims. Medical treatment and prescriptions for work-related illnesses and injuries are not covered by most health plans. Typically, separate entities provide health plan and workers' compensation coverage to the employer. Workers' compensation coverage is typically provided at the employer level with blanket coverage for work-related illnesses and injuries suffered by any eligible employee. Workers' compensation claims are far less frequent than medical and drug benefit claims covered by most health plans. As such, the cost of keeping track of employees and issuing identification cards is not usually justified for the workers' compensation carrier given the average number of workers' compensation claims processed.
Pharmacies may be required by workers' compensation laws to fill prescriptions without charge to patients who present a prescription subject to a workers' compensation claim. However, pharmacies are unable to efficiently adjudicate prescriptions for workers' compensation claims because of a lack of coverage information. Since workers' compensation coverage is seldom provided by the same entity as regular health benefits coverage, pharmacies frequently do not know where to obtain reimbursement for workers' compensation medication claims and/or lack a convenient method for submitting such claims. The pharmacy may be able to obtain the name of the patient's employer, but it is usually impractical for the pharmacy to obtain the name of the workers' compensation carrier and to confirm that the claim is covered. Most pharmacies do not have staffing to call the employer and take other steps necessary to identify the obligor and submit the prescription bill for reimbursement.
Consequently, many pharmacies are forced to sell their workers' compensation prescription claims to third party billing companies. These companies pay the pharmacy a percentage of the dispensing price for the medication and then identify and obtain payment for the entire amount from the obligor, profiting from the difference. Because the obligor is not dealing directly with the pharmacy, the third party billing company can seek reimbursement at retail rates that are higher than the rates that a PBM may have negotiated with the pharmacy on behalf of the obligor.
These shortcomings of the current system of adjudicating workers' compensation prescription claims operate to the disadvantage of pharmacies, workers' compensation carriers, employers and consumers. Pharmacies loose revenues by being forced to sell workers' compensation claims to third party billing companies at a discount. Workers' compensation carriers are forced to pay for prescriptions at standard retail price, rather than at negotiated discount rates. Increased costs caused by the inefficiency of the current system are passed along to the employer, which is forced to pay higher insurance premiums to cover the increased costs. These costs are ultimately passed along to consumers who must pay higher prices for goods and services of the employer. Thus, there is a strong need for an improved method for adjudicating workers' compensation prescription claims.
The present invention overcomes the shortcomings of the conventional method described above, while providing a number of advantages to the physician, pharmacy, and workers' compensation carrier. For the physician, the present invention can reduce paperwork, facilitates eligibility confirmation, and reduce the administrative time spent on follow-up calls relating to such things as formulary, eligibility and Drug Utilization Review (DUR). For the pharmacy, the present invention can provide for quicker payment of bills, more revenue, less paperwork, reduced errors transcribing written prescriptions, and simplified administrative processing. For the workers' compensation carrier, the present invention can reduce prescription costs and allows quicker claim resolution and turnaround. The present invention provides these and other advantageous results.